Ocean, Air, Road market insights – February 2022

Ocean: further delays caused by China’s zero-Covid restrictions compound port congestion.

• Delays caused by regional lockdowns at Chinese port cities (Ningbo, Shanghai and Dalian) due to China’s zero-Covid policy have continued to impact port operations. Meanwhile, global schedule reliability dropped to 32% in December (-1.2% MoM change), it’s lowest since ever being recorded¹. This is worse on major East-West lanes (Asia-NAWC 10%, Asia-NAEC 19%, Asia-North Europe 23%) whilst vessels at European ports experienced waiting times of 2-4 days (Felixstowe 7-10 days).
• Capacity: deployed capacity for 2022 is on the up, in line with increased demand on the Asia-North Europe trade lane (carriers replacing smaller vessels with larger ones has also helped). Despite rates reaching record highs in 2021, volumes increased 32.2% compared to pre-Covid times^2,3.
• Rates: spot rates changed regionally on the FEWB in January (-3% MoM, at $15-16K) due to reduced demand caused by lower manufacturing outputs⁴. Post CNY and through H1 2022, rates are expected to stay high.

1. Sea Intelligence, Schedule Reliability
2. Sea Intelligence, CNY capacity
3. Drewry monthly sea and air insights
4. Xeneta

Air: deployed capacity and freight rates decrease in line with demand.

• Contrary to the usual peaks in demand before Christmas, demand for air cargo dropped very slightly in December (-0.4% MoM¹).  This can be explained by lower production outputs caused by prolonged lockdowns as well as ongoing congestion, and the sudden surge of Omicron cases that forced cancellations due to air staff sickness and quarantine.
• Capacity: passenger demand improved in certain regions (intra-Europe) over 2021, while recovery of long-haul flights from Asia Pacific were hampered by elevated travel restrictions. Global capacity in December 2021 dropped by 38.6% vs December 2019  due to these labour shortages, and lack of available capacity in high demand locations².
• Rates: dropped by -21.6% MoM in January as air freight enters its traditional lull period, and lower than expected volumes due to production issues. Rates continue to remain in line with seasonal trends pre and post CNY, and will continue to soften through H1 2022.

1. IATA, Air Cargo Monthly
2. IATA, Economics: Bookings point to falling traffic.
3. Loadstar, Shorter air peak for air cargo

Road: capacity issues and lead times on European freight set to increase with EU’s new ‘Mobility Package’ this month.

• New rules on the posting of road drivers will apply from the start of the month, as per the European Commission’s Mobility Package. Key changes to bear in mind are the new rules around work, rest and cabotage regimes, which aim to improve working conditions for drivers. Delivery times will certainly increase as a result.
• Capacity. Longer delivery times and new paperwork brought about by this will likely have a short-term impact on existing capacity constraints. Already, issues seen since Q2 2021 (port congestion, increased demand, driver shortages), will continue to dampen European road freight recovery as the UK, Germany and Poland have a shortfall of 60,000 drivers¹.
• Rates: hit record highs across Europe for Q4 2021, whilst rates between UK-France are nearing all time highs (+10.8% rise in Q4 2021 vs Q4 2020)².  Global supply constraints, rising fuel prices and driver shortages caused by Brexit and the pandemic are all to blame. Until we see these easing, rates are likely to remain elevated through the first half of the year.

1. Ti, Upply & IRU, Quarterly European update
2. IRU, European freight rates up

H1 2022> plan ahead to secure capacity early

• Post CNY planning. A reduction in available workforce at factories, ports and airports along with the pre-CNY backlog will continue to cause short-term bottlenecks. If it’s possible, we recommend forecasting demand early, and consider blending ocean and air freight to spread your risk.
• EU Road freight: book ahead. EU road freight delivery times are likely to increase with new legislation coming into effect this month. In anticipation of this, we recommend getting making your bookings earlier than usual.
• Visibility platform. With a digitally connected supply chain, it’s easier to make informed decisions about prioritising goods and spreading shipments. We recommend asking for transit times where possible, and reviewing supplier performance so you can plan better ahead.

‍